How to Negotiate a Warehouse Lease in a Tight Market (4 Winning Tips)

Businesses looking for warehouse space are finding themselves in an increasingly tight market. With industrial activity shifting as the country is deep in the midst of economic turmoil,?it's more important than ever for businesses to negotiate their best lease.?

Finding the right property is critical to success, but there are certain things that need to be taken into consideration before signing a lease. In this article, we will discuss some key points that should be kept in mind when searching for a new warehouse space and negotiating your best lease possible in today's competitive market.

1. Opt for a Longer Lease?

The warehouse market is ever-changing as demand rapidly evolves. Interest in industrial markets has been tight since the pandemic.?Online retailers dominated and the pressure for to accommodate consumer purchases with appropriate facilities drove down vacancy rates.?

However,?we’ve reached a threshold where this?interest is beginning to wane.?Initially, to capitalize on the pressure on the industrial market, developers planned to build more warehouses. Now faced with high interest rates and inflationary pressure, companies that planned to expand their warehouse footprint are pulling back. This comes as the recent construction projects are gradually ready to lease. Now, warehouse landlords are wary of a newly saturated market and the negative effect its having on demand.??

“Warehouse supply has now outstripped demand for the second straight quarter. The gap between supply and demand could widen even further as more warehouses hit the market — space under construction in Q4 was 21.7% higher YoY, though developers are beginning to pull back on new project plans.”

-Supply Chain Dive

But, regardless of how the market fluctuates, you can improve your stock by opting for longer term leases.?Long-term tenants can launch more competitive negotiations with landlords, increasing the likelihood they get the best possible terms and price in their lease.

Think about it.?In the midst of so much uncertainty, you can guarantee them some stability.?Your long-term tenancy will shield them from the volatility of demand, to some degree. They’ll be more willing to concede to your terms if they know you’re in it for the long haul. Long-term leases give you better footing for negotiation across the board. Don’t expect them to bend over backwards for a tenant who guarantees them income for just a few years.?

By this same reasoning, don’t discount any property that doesn’t entirely match your needs?too early.?With pressure increasing on landlords to find credit-worthy tenants, they may be more willing to provide you with?a more compelling Tenant Improvement Allowance. This means that if you like the location of a space and its layout, but it perhaps needs higher ceilings or an upgraded HVAC system, your landlord may agree to cover costs.

Beyond these factors, are other key building specifications to be aware of.?And it's never too early to be prepared with how they may implicate your warehouse touring experience.?So, enroll in the quick, free course below to learn the 70+ points to consider when looking for warehouse space.?

2. Look Ahead and Start Early

Starting your warehouse search early is critical to finding and negotiating the best property and lease. Put time on your side,?and a lot of it!??

Finding a warehouse?is no quick and easy task. consider the length of time it takes to go through the?process of finding new space. You never want to leave yourself without any options, especially since the industrial market is the most competitive of the CRE sectors.?

From beginning to end, you are likely looking at several months to find the optimal location followed by several weeks of negotiation. Then,?depending on the state of your warehouse and lease agreement, you may need to buckle in for months of renovations to get the space in working order for your operations.?

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